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HQ 111993

February 19, 1992

VES 13-11/18 CO:R:IT:C 111993 MLR

CATEGORY: CARRIER

Deputy Assistant Regional Commissioner
Classification and Value Division
ATTN: Regional Vessel Repair Liquidation Unit 6 World Trade Center
New York, New York 10048-002980

RE: Vessel Repair Entry No. C10-4907958-0; Protest No. 1001-90- 008645; M/V FRANCES HAMMER.

Dear Sir:

This letter is in response to your memorandum of November 13, 1991, forwarding the above-referenced protest filed by Givens & Kelly on October 30, 1990, on behalf of Ocean Chemical Carriers Inc.

FACTS:

Marel Technical, S.A. (Marel) performed repairs to the FRANCES HAMMER's radar systems in Greece on September 25, 1989. Raytheon Service Company (Raytheon) paid the cost of the repairs for Ocean Chemical Carriers Inc. (Ocean Chemical), the vessel's owner, in accordance with a maintenance contract. Marel's invoice indicates that the vessel's radar repairs involved: (1) the starboard display radar 16" unit (16" unit), (2) the ARPA Raypath display unit, and (3) the port radar 12" unit (12" unit). It appears that the 16" unit was inoperative because of a broken CRT tube. The ARPA Raypath unit was inoperative because of a defective power supply unit. The 12" unit was malfunctioning because of dirty relays.

The vessel repair entry (C10-4907958-0), filed October 12, 1989, the same date the vessel arrived at the port of Linden, New Jersey, lists labor costs in the amount of 64,940 drachma ($386.26 entered U.S. cost). Ocean Chemical asserted that since it did not incur labor costs because the charges were covered by Raytheon under a maintenance contract, the cost of the foreign labor is not dutiable. The vessel repair entry did not list amounts for material parts or equipment. Since the Marel invoice recommended that the 16" unit required a CRT tube and an indicator power module, but did not clearly indicate whether such foreign parts were purchased, the Vessel Repair Unit issued a notice of action requesting that invoices be submitted for the cost of parts used in the foreign repairs. The notice of action also indicated a proposed increase in duty based on these costs. On December 20, 1989, Ocean Chemical submitted two invoices that it received from Raytheon. The first invoice (No. BO345- 01895) was for a 12" CRT, which was allegedly replaced in Jacksonville, Florida on October 19, 1989. The second invoice (unnumbered) was for an indicator power module, also allegedly replaced in Jacksonville, Florida, on October 19, 1989 (although the invoice does not state this).

On January 4, 1990, the Vessel Repair Unit issued another notice of action, asking whether the 12" CRT Tube replaced in Raytheon Invoice No. BO345-01895 was the same piece mentioned in the Marel invoice. On January 19, 1990, Ocean Chemical confirmed that the CRT was the same. Since the Marel invoice referred to a 16" CRT tube, and Ocean Chemical submitted an invoice for a 12" CRT tube, Headquarters Letter Ruling 110929, dated August 7, 1990, held that the 16" CRT tube was replaced in Greece from the ship's spares. The cost of the CRT tube was considered a part of the foreign repair because its origin was not proven.

In the protest before us, Raytheon invoice no. BO345-89364 is submitted, indicating that a CRT and a power supply were replaced in the 16" unit on October 13, 1989, in Linden, New Jersey.

ISSUE:

Whether the evidence presented is sufficient to prove that the parts for which the protestant seeks relief were replaced in the United States and therefore are not subject to the duty set by 19 U.S.C. 1466.

LAW AND ANALYSIS:

Title 19, United States Code, section 1466, provides in pertinent part, for payment of an ad valorem duty of 50 percent on the cost of foreign parts purchased and foreign repairs to vessels documented under the laws of the United States to engage in the foreign or coastwise trade.

With regard to the foreign labor charge which Raytheon paid for Ocean Chemical under a maintenance contract, Headquarters Ruling Letter 110929, dated August 7, 1990, held that the vessel repair statute authorizes no exception where the cost of repairs is either prepaid or paid in the United States under a service or maintenance contract (citing Headquarters Ruling Letter 101748, June 9, 1976; Headquarters Memorandum 104516, November 18, 1980). Accordingly, the Marel labor costs for repair of the radars are dutiable.

In the protest currently under consideration, the protestant has submitted two Raytheon invoices documenting that a CRT tube and an indicator power supply were installed in the 16" unit in the United States. The Marel invoice, now read in conjunction with the Raytheon invoices, indicates that the 12" unit was tuned and the relays were cleaned. Further, the ARPA Raypath unit was repaired by using the power supply from the 16" unit. It appears that upon the vessel's subsequent return to Linden, New Jersey, a power supply and a CRT tube of U.S. origin were installed in the 16" unit on October 13, 1989. Therefore, we conclude that no additional or spare parts were used in the repairs performed in Greece. Accordingly, the cost of the CRT tube and the indicator power module should not be included in determining the cost of the foreign repairs.

HOLDING:

The foreign labor costs to the vessel are dutiable under 19 U.S.C. 1466 regardless of the fact that, because of a maintenance contract, the vessel's owner did not directly incur these costs. Further, the additional invoices submitted show that no foreign parts were purchased, but that U.S. parts were installed subsequent to the vessel's arrival in the United States. Thus the parts are not subject to the duty set by 19 U.S.C. 1466.

Sincerely,

B. James Fritz

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